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For recent grads who are having a hard time finding a job,
starting up a business would be ideal, save for one thing: their
giant student loans.

President Barack Obama yesterday announced more details about his
plans to ease federal student loan burdens for low-wage earners
like those looking to start a business, join a startup or work
for a nonprofit. Though the program would help alleviate the loan
burdens of students in general, one of its main goals is to
lessen the financial pressures young entrepreneurs face when
starting up companies.

Under the plan formally announced yesterday in Denver, starting
next year, the President plans to lower borrowers' payment caps
to 10 percent of their discretionary income -- that is a person's
income after accounting for other living costs. The new measures
would also shorten the forgiveness timeline to 20 years from 25
years. So, if someone had $100,000 of federal loans and earned an
annual salary of $30,000, that person's monthly payment might
amount to $1,150. Through the program, that borrower would pay
just $116 a month, and, after 20 years, the leftover debt would
be forgiven.

This proposal builds off of the existing Income-Based Repayment, or IBR, option for
low-wage earners with federal student loans. The program
currently caps federal-student loan payments at 15 percent of
discretionary income -- falling to 10 percent in 2014.

Though the data on how much student debt entrepreneurs have upon
leaving college isn't known, the overall burden recent graduates
faced amounted to an average of $24,000 last year -- surpassing
credit card debt for the first time ever. Tack on getting a
Master of Business Administration or a law degree, and debt
levels rise dramatically.

The result is that many would-be entrepreneurs simply turn away
from starting up in favor of a steady paycheck -- especially
considering that in the early days of starting a company revenues
can be slim, if present at all. Though some entrepreneurs like
Jason Rivera have chosen to defer their student loans.

Upon graduating from Lehigh University in Bethlehem, Pa., Rivera
began paying back student loans of more than $100,000. Though
steep, his $700 monthly loan payment was manageable as he worked
for an advertising agency in New York. But entrepreneurship
beckoned, and he spent the past year building Live Life Every Day LLC., a brand of
organic clothing based in Piscataway, N.J. He could no longer
meet his loan payments and so the 22-year-old decided to seek
a deferral. The deferral for his federal loan, which accounts
for roughly 20 percent of his overall debt bill, lasts for six
months. For the balance, Rivera has two private loans, which
he can only defer for three months at a time at a cost of $50
each.

This strategy does help alleviate some of the pressure startup
entrepreneurs face, but it's not ideal by any stretch. By staving
off loan payments, owners are allowing the interest on their
loans to build -- making paying off their debts harder to muster
as time goes on.

Of course, the President's new plan only addresses federal
student loans -- not those issued by private institutions, which
are common among students graduating from pricier universities
and graduate education programs. Sam Gordon, the 27-year-old
co-founder of the Oona, a smartphone-stand maker, pays
around $800 to $900 a month in student loan payments, and he
lives in New York City, which is notorious for its sky-high
cost of living. "I pay the same amount in school loans that I
pay in rent," he says.

If the University of Southern California grad participated in the
program, he would be eligible to reduce just $7,000 of his total
$120,000 student loan debt, as the rest is made up of private
loans. Gordon would consider participating in the program, but it
likely wouldn't do that much good, he notes. "Being an
entrepreneur can be frustrating at times…but it's a sacrifice,
and I knew that."